Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: keroche

Kenya’s alcoholic drinks control act is the talk of the country
The new law which restricts the sale of alcohol, bar opening and closing times, prescribes penalties on offering brewers, sellers, patrons etc. is temporarily on hold after an association of bar owners from Muranga in Central Kenya filed a court case to delay its implementation. But in a rejoinder, another group of leaders from Muranga County (see website) have come out and supported the bill via a full-page colour advert in the newspapers. They claim alcohol has ravaged the county leading to death, blindness, family break-ups, but most important the waste of able-bodied youth and men who would otherwise be engaged in productive agri-business (coffee, tea, milk, horticulture).

More on the positive side of the alcohol ban can be found in a separate newspaper article in the Saturday Nation which showed the dramatic effects the ban had on a small village in Gatanga (Central Kenya), and the scenes were probably mirrored in many other rural villages that have (previously) seen similar effects on alcohol abuse on productive population.

….although it is noon, the young folks are sober, a state locals say is a miracle. “By noon, half of them would be drunk,” says Mr Michael Muthee, 45, a carpenter. He should know: Although offering to pay Sh300 a day for a helping hand in his workshop, he found it hard to find a sober young man before the new alcohol laws came into force. And when he did, the fellow could not be counted on to return the next day, least of all, sober.

…Before the new laws came into effect, he says, much of the work on the coffee farms was left to women and children, The male folk would vanish in morning and stagger home in the evening.

So what’s in the bill being championed by the National Campaign Against Drug Abuse Authority (NACADA), but which a Member of Parliament John Mututho took most of the credit and now some blame for hurriedly pushing through?

– NACADA which operates under the Office of the President, and not from either Ministry of Health (why there are two Health Ministries and two education Ministries in Kenya is another story) sought to tackle the increased availability of outlets selling alcohol, and the marketing of it to (and use by) youth (under 18’s).

Enforcement: NACADA is meant to educate Kenyans on the dangers of alcoholism. But so far there has been little education (clause 69), and the agency which is to give statistics on alcohol which they collect state (at their website) that 15% of 15-64 years-old’s in Kenya take illicit brews.
– Changaa Legal: Kenya’s most popular illicit brew is going to be legalized (repeals changaa prohibition act (69). The Government is going to develop standards for changaa which is to be brewed and packaged in a manner similar to Uganda’s Waragi and Tanzania’s konyagi, and sold in glass bottles larger than 250ML.Fund: There is now an alcoholic drinks control fund supported brewer, wholesale & retail licenses – and of money raised, not more than 15% will go to civil society groups and not more than 50% to the district alcohol committee (led by district commissioner)
– Being drunk in public can attract a fine of Kshs 500 ($6) or 3 months in jail (a mismatch? – @archermisahle says cops are asking 1,000 for people who stagger out of pubs)
– Restricts police harassment: Only senior police officers can conduct inspections, not the loitering patrol cops (25)
– Special Ones: There is some elitism at play, and places exempt from the Act (7) include national assembly (parliament), clubs (i.e. sports, social), military & institute canteens. A separate newspaper notice extended some exemption to hotels (tourists/guest) and restaurants (patrons who eat) but these are not spelt in the act.

Promotion Landscape Changes: Kenya’s popular music reality shows contest – Tusker Project Fame would be no more unless it can be rebranded as something else (Alvaro Project Fame perhaps?)
– Bottle top lotteries (check under your bottle cap & win) are banned (47) as no promotion can be run that encourage alcohol consumption
– Also while EABL’s Tusker brand has bailed on the world famous Safari Sevens rugby tournament (now known as the Safaricom Sevens), alcohol can’t be sold at the event which also features schools rugby competition (46) – will the organizers exclude schools and any spectators under 18 from the tournament?

Four months ago last review (should be a quarterly exercise going forward) . 2008 has been a year with high prices and cost of living factors in the news. From the post-election violence in January to the (then) world oil prices, the pinch has been felt in Kenya.

The Government has come under pressure, but without addressing of its own excesses (procurement, new offices & limousines, parliemantarians, councilors and judges who refuse to pay income tax), has likewise tried to run the screw on the corporate sector – resulting in efforts to reduce the price of petrol and now maize flour (staple food)

Gotten more expensive

Staple food: Maize flour which is used to make Ugali, that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 97 which is 1/3 more than the Kshs. 73 four months ago. Farming woes continue, the crop this year is bad and Unga who said that they ran out of flour, among other revelations at their AGM, also stated that the maize harvest in 2009 will be worse and high prices will continue. There have been allegations of dodgy imports and the Government is today trying to arm-twist the price of Unga down to Kshs. 55 (EDIT – the Government announced today that maize will cost Kshs. 72 in urban areas and Kshs. 52 in rural areas)Other food item: Sugar (2 kg. Mumias pack) is at Kshs. 160, up from Kshs. 145 three months ago. For Mumias customers and shareholders, the price is even lower for other unbranded sugar(s) on shelves.

Foreign Exchange: 1 US$ equals Kshs. 79.08, (18% weaker) than the Kshs. 67.4 four months go. This is partly the strengthening of the dollar, partly outflows from Kenya (at the NSE) – and comes after the shilling (while strong) had cushioned some impact of high oil prices.

Gotten cheaper

Fuel: Litre of petrol fuel (at local petrol station) is now Kshs. 92.7 (~$5.40 gallon) which is about 10% cheaper than the Kshs. 101.50 seen last time. While that is still higher than it was at the beginning of the year, and oil prices are down over 60% from the record highs of mid-2008, it is remarkable that for once fuel prices have reduced. In the past they have merely stagnated and oil companies, not passed on savings to consumers, but the threat of the government to regulate the prices, and a sustained media campaign (web/radio) has resulted in a slight reduction in petrol prices. (EDIT – A leading oil marketer – Shell announced today that prices will drop by Kshs. 15)

Entertainment: Bottle of Tusker beer (at local pub) is Kshs. 120 down from Kshs. 130 (cheaper by 8% from four months ago). Don’t know if this is one pub decision or the competition from new Summit beet launched by Keroche in October 2008 – the first true local competitor since (South African) Castle folded shop about six years ago. How will EABL fight back, and do they have to? Keroche got off to a good start but there has been little post launch marketing.

Communications: Continues to get cheaper as two mobile phone companies have become operational in the last quarter of the year – Orange (France Telkom) and Yu (Essar/Econet). The tone was set by Zain’s successful Vuka tariff, priced at Kshs. 8 per minute to call any network. Market leader Safaricom responded with Jibambie (up to a 63% discount) which enabled their subscribers to make calls at prices ranging from Kshs. 8 down to Kshs. 3 per minute if they bought a bigger denomination airtime voucher. The battle for subscribers is shifting now from voice calls which have reached unprecedented lows to data and money transfer where Safaricom is effectively Kenya’s largest ISP and money wallet.

No change: Electricity: My November KPLC bill is still Kshs. 1,900, same as it was in August, with a fuel surcharge reduction yet to be effected. High electricity prices have been a major cause for concern among Kenyan companies leading to President Kibaki to call for a reduction in the taxes levied on petrol prices and electricity.

But: Related: Is the quality of official statistics inflation data in question?EDIT – Challenged by inflation, but with a view to improving liquidity, the Central Bank of Kenya today lowered the CBR rate (implied base rate) from 9 to 8.5% and also lowered the bank minimum cash ratio from 6 % to 5%

Equity vs. BarclaysEquity Bank is often cited as being what caused banks, especially Barclays Bank to change their focus. But is it true, or is Barclays expanding all over Africa not just Kenya, in terms of opening new branches and expanding into the retail sector.

political muscle: A recent editorial strongly defended Equity and it has also received strong defense from Government ministers whenever allegations have been thrown against the bank.

Equity has also not been shy in employing political muscle themselves. The delayed conversion of rival building society into Family Bank has been linked to Equity’s influence and the bank was also instrumental suffocating pyramid schemes who grew to rival banks for deposits while ironically relying on banks for their massive fund transfers to/from investors.

Equity in 2008: Even if 2008 brings in a new government, Equity Bank should be ok. While the current government has been kind to Equity, giving it the space and access to market, environment to expand, Equity has been smart to use their access to Government to grow, without necessarily going to bed with the government. I.e. targeting government and parastatal deposits and banking business. Equity has expanded nationwide and has customers throughout the country and a positive image as a mwananchi bank. Think Kenol, not Mugoya for Equity next year, if the election follows the current polls

other banking briefs

Barclays bond: Barclays Kenya will issue a $75 million bond over 7 years. Seem receptive, though their last bond to finance a mortgage business was scuttled by former finance minister who asked that the bank invest new money into Kenya, not borrow from the local market. That should whet the appetite for corporate investors who may be put off by the anticipated over-subscription (wasted funds, lost opportunity, delayed refunds) of a Safaricom IPO

But is Barclays parent in trouble? The global financial crisis has also taken done in the Citi (bank) CEO

Merger slows It’s a shame that the CFC-Stanbic merger can be jeopardized by a frivolous lawsuit frivolous lawsuit. How does a 50 million shilling dispute balloon into a 25 billion shilling lawsuit for damages?

City Finance is expected to be taken over by new owners. Kenya’s smallest bank should get a boost from new owners – as it is the only loss making bank so far this year. As at June this year, it had assets of just 510 million shillings ($7.7 million) in assets, deposits of of 131m, and loans 218m.

Collapsed banks update: Capital Finance and Pioneer Building Society are to be wound up while customers of Daima Bank will be paid another dividend

Bad loan relief?: The interest rates advisory centre offers loan and mortgage interest recalculation, financial cost assurance (overdraft, loan interest), in-duplum interest recalculation for the period (1/1/2001 to 31/7/2005) and informs its clients that that all bank charges from 1/11/89 may be illegal!

Keroche going into beer production after huge bill handed to them of unpaid taxes. This is the last thing that Kenya Breweries wanted to hear

The Minister for Finance has approve the takeover of Kobil Petroleum by sister company Kenya Oil Company Limited (Kenol). But Kobil is/was a Delaware corporation?

Fake sugar: Strange saga of a ship which arrived at Mombasa with contraband sugar already packaged in Mumias sugar bags – ready to go to store shelves. Packing sugar in their ‘produced in Kenya’ branded bags has been a key branding initiative by Mumias to differentiate it from imported sugar and seems to have worked, but counterfeiters can only be kept at bay for so long

Wananchi TV: convergence as Kenya’s largest ISP wananchi is going into partnership with GTV to begin high speed cable and satellite TV all in one package.

Also mobile TV on phones : a few months ago, the bosses of Kenya Broadcasting Corporation were on TV from a golf tournaments talking about their plans for the rest of the year which included launching a new radio station and also coming up with the first news broadcast via mobile phones by September. (Read on – KBC is a shareholder in the local multichoice Kenya)

Opportunities

– A new Equity Fund in Kenya urgently looking for a financial systems engineer with banking experience. Apply to ndeman2@yahoo.com